How to Avoid Debt Settlement Scams

Are you considering debt settlement? If so, you’re probably in dire straits, financially speaking. And that means you’ll have to be careful. There are a ton of opportunistic companies who’d like to take advantage of your bad fortune. While there are reputable debt settlement firms, there are just as many running predatory schemes through disreputable business practices. So how can you avoid debt settlement scams?

Read on to learn how to distinguish reputable firms from exploitative scammers. Plus, check out our list of vetted debt settlement firms to find one you can trust.

What are debt settlement scams?

A debt settlement scam occurs when a company solicits your money for debt relief services that they never intended to provide.

In most cases, they’ll offer to negotiate with your creditors on your behalf, just like a real debt relief firm would. Then they’ll take your money and run.

In other cases, an exploitative debt settlement firm will string you along for months or even years. They’ll collect payment after payment, making false promises while your debt continues to grow.

Even worse, these debt settlement scams often look totally respectable. They run advertisements on TV or on the radio. They maintain official-looking websites, and they hire representatives to answer your questions over the phone.

Of course, there are reputable debt settlement firms out there. And we all need a little help sometimes. So how can you tell the scams from the genuine services?

What are the signs of a debt settlement scam?

Want to know if a debt settlement company is trying to take advantage of you? Keep an eye out for the following red flags.

They make you pay upfront

Did you know that it’s illegal for a debt relief firm to charge upfront? It’s true! That means that if a debt settlement firm asks you to pay upfront, they’re already breaking the law. That greatly increases the odds that they’ll take your money and run.

If you’re speaking to a debt relief firm that asks for money upfront, report them to the FTC. You could prevent another, less prudent customer from getting scammed.

They guarantee success

Unfortunately, when it comes to debt relief, there are no guarantees. So if a debt settlement firm guarantees a successful settlement, that’s a huge red flag. It means that they’re willing to lie to you to get your money. And if they’re lying about that, what else might they be lying about?

They tell you to stop contacting your creditors

When you’re struggling to pay your debts, the best thing you can do is stay in touch with your creditors. Proactively keeping them informed about your situation is the single best way you can stay on top of your debt. The more you communicate with your creditor, the likelier they are to work out an agreement with you!

So if a debt relief firm tells you to cut off all contact with your creditors, it should set off your alarm bells. Likewise, if they tell you to switch your mailing address so that they receive your creditor’s statements in your stead, you should feel suspicious. A reputable debt settlement company should work with you to help you manage your debts. If they want to keep you out of the loop, they’re probably trying to take advantage of you.

They enroll you in a debt relief program before reviewing your situation

In order to come up with an appropriate debt relief program, debt relief companies must review your financial situation with you. If they slot you into a particular program without even looking at your situation, they’re either completely incompetent, or they’re trying to rob you. Hang up the phone and report them to the FTC.

Getting started

With all the exploitative practices out there, how can you find a debt settlement firm that you can trust? Don’t worry — SuperMoney already did the hard part. Click here to check out our vetted list of reputable, top-rated debt settlement firms. You can compare your options side-by-side and read unbiased reviews from past customers.

Or if you want to learn more about debt settlement, click here to read our in-depth guide.